Politico: CFPB Worked “Hand-in-Hand” with Consumer Activists to Draft Regulations

The Center for Responsible Lending (CRL) pressured the Consumer Financial Protection Bureau (CFPB) at high levels to crack down on payday lenders while at the same time seeking the CFPB’s support for its competing loan product, according to emails uncovered by the Community Financial Services Association (CFSA) and detailed in a new report in Politico.

“For more than a year before CFPB put out its proposed rule to crack down on payday lenders, the Center for Responsible Lending and other advocacy groups, such as the National Consumer Law Center, worked with the agency to help craft the proposal.”

Sharing Research “so that CRL could make sure ours was as parallel as possible”

The federal regulator appears to have largely outsourced its rulemaking to a consumer activist group:

“In November 2013, as it was researching regulations, CFPB requested data from the nonprofit on payday lenders ‘to help focus these efforts.’ The next month, a staffer for the Center for Responsible Lending requested a copy of the agency’s overdraft analysis ‘so that CRL could make sure ours was as parallel as possible.’

“That spring, David Silberman, associate director for research, markets and regulations at the CFPB, requested an outline on payday lending from CRL President Mike Calhoun. Calhoun replied, ‘Feel free to improve it!’

“Their familiarity grew over the months. ‘It’s been almost three weeks. Starting to have withdrawal pains,’ Silberman wrote in April 2014 as he asked to set up another meeting.”

Financial Motivation to Eliminate Payday Lending?

The article shows coordination around a CRL-affiliated loan product:

“At the same time, Self Help Credit Union, which is affiliated with CRL, was talking with CFPB officials about a new product it dubbed the ‘just right’ loan. The credit union, which reported $25.8 million in profit last year and has 22 branches, exchanged emails in fall 2014 and later held a conference call that December with CFBP staffers to discuss the payday lending alternative.”

Revolving Door between Activists and Regulators

The article also documents CRL’s strategy of infiltrating the highest levels of regulatory agencies to advance its agenda:

“CRL’s influence at the consumer agency went beyond meetings and proposals. One of its executives, Leslie Parrish left CRL in 2013 to join the CFPB as program manager for payday and small-dollar loans. After two years in the job, she returned to the nonprofit. Janneke Ratcliffe, assistant director of financial education at the CFPB, also worked for Self Help Credit Union.”

A single payday advance is typically for two to four weeks. However, borrowers often use these loans over a period of months, which can be expensive. Payday advances are not recommended for long-term financial solutions.